Must I offer equity to snare the best staff?

Dear Aunty B,

I am finding it very hard to attract high quality staff to my business. I get very close to snaring them but at the last minute they change their minds and chose a “safer” option. It happened again yesterday to a potential employee that would have been fantastic. But after he went home to think it over his wife talked him out of it.

One part of me says that if they didn’t take up the position then they weren’t right for the firm anyway. But I also know I need to bring in the best people. He also asked about equity, something that my business partners and I have agreed not to do. We feel very strongly that no one deserves a part of the business that we have worked so hard to build. We took incredible risks and nearly lost our houses at one point. But are we wrong? Is this the only way that I can attract good people? Or should we not give up our hard earned rewards? And there is no use suggesting profit share or bonuses. This guy is after equity.

Leon,
Vic

Dear Leon,

Doesn’t that annoy the hell out of you? You take all the risk, start the bloody thing, don’t sleep for three years from the stress and finally get the business to the next stage when you have to build the key leadership team and what do they want? To waltz in and get a share of the action!

What money have they put in? What sacrifices have they made? What sweat have they sweated? What blood have they blood let? Zilch. And yet here they are demanding a share of your company!

Get stuffed, I say.

And then… something happens. You start to imagine that person at your meetings. You start to think of what they might do, how they will change things. You start to have fantasies about what you might be able to achieve… and this ferocious desire to have that person in your business takes hold.

But it gets worse. Slowly over time the thought of not getting them starts to give you sleepless nights. And while you are on the treadmill at the gym you run even faster, driven by anxiety – what will happen if you don’t get them? How will you fill that void when they are in fact so perfect, so desirable, so your future?

At that point, you know… you MUST get them. And that, my friend, is the point where you come to the conclusion that if equity is the way to do that, then it is equity that you must offer.

You are at that point. Don’t panic. Your job now is to convince your business partners that you must go ahead with this. You need to make them understand that you are in the “second phase” and the key people who come in at this point are just as valuable as those at the start.

If they end up contributing in a major way to the end result – a successful sale that makes you all wealthy – shouldn’t they get a share of that?

What you need is a plan. Agree on an amount of equity that you can set aside. See a really good accountant and lawyer that specialises in this.

And make sure you include in the scheme a mechanism whereby you can buy back the shares from staff who leave.

So Leon, you know what you must do. If the desire to have the person is all consuming, equity it is! Otherwise, back to the job market.

Good luck!
Your Aunty B